My wife and I are about to file for Chapter 7 pro se. We have no real property and assets of $40,000 which are all exempt (including $10,000 in a retirement account). Our (all unsecured) debts are $480,000, but 1) approximately $305,000 of that are student loans which can't even be discharged and 2) the remaining $175,000 is double or triple the "real" amount of credit card debt because the banks sold them to collection agencies who sold them to other collection agencies, etc. We can't determine who currently holds what debt, so we are listing everyone who is either sending us bills/demand letters or is listed on our credit reports.
It is my understanding that the U.S. Trustee is primarily concerned with the Means Test, the difference between income and expenses, and whether you should be forced into a Chapter 13. The Chapter 7 Trustee, on the other hand, wants to know if there are any assets available to pay creditors (there are not), fraudulent transfers prepetition, etc.
Looking at my last 6 months income (Sept-Feb), we are only $54 under the state median. This is due to the fact that last Sept my checks were slightly lower than normal due to an earlier overpayment. If we used Oct-Mar income, we would be about $3000 over the state median income. I have completed the Means Test based on that higher income, however, and we still pass. This is just using the default numbers without any adjustments.
My concern is that the U.S. Trustee might become interested in this case because we are so close to the median income and send a demand letter for a ton of information including multiple years of bank records, etc. This worries me because we just don't have most of what is typically requested. We cut up our cards about a year ago and didn't keep any old statements. Also, we have been on a completely cash basis for nearly a year, but haven't been saving receipts, etc. If we had cash we spent it, if not we didn't, and we didn't keep track of anything else -- which is exactly the kind of irresponsible behavior which got us into this mess in the first place.
We can get the last year's worth of bank statements, but I have no record of what we spent cash on or what the source of most nonpayroll deposits were. I don't think the withdrawals are such that it would look like we were hiding assets (we weren't), but 1) our record keeping was clearly grossly inadequate, which theoretically could be the basis of dismissal/denial by itself and 2) a U.S. Trustee could argue that unexplained deposits should be treated as income, thereby putting us over the median and into a 13. I would like to avoid both of these.
I see two courses of action: 1) just file, hope the U.S. Trustee doesn't get interested, and if he does, deal with it as best we can or 2) send a letter to the U.S. Trustee immediately after we file documenting: a) my last 6 months pay stubs, b) a draft of the means test showing we would still pass even if it were not for the dip in income last Sept, and c) detailed documentation of our current Schedule J expenses, which we have and which exceed our income by several hundred dollars per month. [BTW, we are able to sustain expenses greater than our income with the proceeds of student loans my wife has been receiving as she studies to complete her Master's and become certified.]
The default is obviously option 1, and indeed this is exactly what we planned to do until I started reading U.S. Trustee horror stories on this site. Option 1 means we will have to sweat out months of waiting to see if the U.S. Trustee gets involved and then deal with the problems noted above if he does. If this happens, we will probably hire a lawyer at that point.
The goal of option 2 is to demonstrate to the U.S. Trustee that this is an appropriate chapter 7 case and hopefully preempt further inquiry, demands for documents, etc. The danger, on the other hand, is that the letter might simply invite exactly the more detailed questioning we are hoping to avoid. [The nail that sticks out is often the one that gets hammered.]
I suppose the best course of action depends upon how interested the U.S. Trustee is likely to be in a case which is clearly no assets and where expenses exceed income, but is also very close to the median income and involve a very large amount of unsecured debt (even though most is student loan/non-dischargeable).
Long story short (too late, I know), what do people think about Option 2? Genius idea or completely insane? (For me, at least, the line between the two is quite thin.) I really appreciate any input, discussion of other people's experiences, etc.
NOTE: Any responses to this post will NOT be considered any form of legal or bankruptcy advice.
BTW, I have a second question I will post in a new thread.
Thanks to all for this great resource! dabusted
It is my understanding that the U.S. Trustee is primarily concerned with the Means Test, the difference between income and expenses, and whether you should be forced into a Chapter 13. The Chapter 7 Trustee, on the other hand, wants to know if there are any assets available to pay creditors (there are not), fraudulent transfers prepetition, etc.
Looking at my last 6 months income (Sept-Feb), we are only $54 under the state median. This is due to the fact that last Sept my checks were slightly lower than normal due to an earlier overpayment. If we used Oct-Mar income, we would be about $3000 over the state median income. I have completed the Means Test based on that higher income, however, and we still pass. This is just using the default numbers without any adjustments.
My concern is that the U.S. Trustee might become interested in this case because we are so close to the median income and send a demand letter for a ton of information including multiple years of bank records, etc. This worries me because we just don't have most of what is typically requested. We cut up our cards about a year ago and didn't keep any old statements. Also, we have been on a completely cash basis for nearly a year, but haven't been saving receipts, etc. If we had cash we spent it, if not we didn't, and we didn't keep track of anything else -- which is exactly the kind of irresponsible behavior which got us into this mess in the first place.
We can get the last year's worth of bank statements, but I have no record of what we spent cash on or what the source of most nonpayroll deposits were. I don't think the withdrawals are such that it would look like we were hiding assets (we weren't), but 1) our record keeping was clearly grossly inadequate, which theoretically could be the basis of dismissal/denial by itself and 2) a U.S. Trustee could argue that unexplained deposits should be treated as income, thereby putting us over the median and into a 13. I would like to avoid both of these.
I see two courses of action: 1) just file, hope the U.S. Trustee doesn't get interested, and if he does, deal with it as best we can or 2) send a letter to the U.S. Trustee immediately after we file documenting: a) my last 6 months pay stubs, b) a draft of the means test showing we would still pass even if it were not for the dip in income last Sept, and c) detailed documentation of our current Schedule J expenses, which we have and which exceed our income by several hundred dollars per month. [BTW, we are able to sustain expenses greater than our income with the proceeds of student loans my wife has been receiving as she studies to complete her Master's and become certified.]
The default is obviously option 1, and indeed this is exactly what we planned to do until I started reading U.S. Trustee horror stories on this site. Option 1 means we will have to sweat out months of waiting to see if the U.S. Trustee gets involved and then deal with the problems noted above if he does. If this happens, we will probably hire a lawyer at that point.
The goal of option 2 is to demonstrate to the U.S. Trustee that this is an appropriate chapter 7 case and hopefully preempt further inquiry, demands for documents, etc. The danger, on the other hand, is that the letter might simply invite exactly the more detailed questioning we are hoping to avoid. [The nail that sticks out is often the one that gets hammered.]
I suppose the best course of action depends upon how interested the U.S. Trustee is likely to be in a case which is clearly no assets and where expenses exceed income, but is also very close to the median income and involve a very large amount of unsecured debt (even though most is student loan/non-dischargeable).
Long story short (too late, I know), what do people think about Option 2? Genius idea or completely insane? (For me, at least, the line between the two is quite thin.) I really appreciate any input, discussion of other people's experiences, etc.
NOTE: Any responses to this post will NOT be considered any form of legal or bankruptcy advice.
BTW, I have a second question I will post in a new thread.
Thanks to all for this great resource! dabusted
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